What is the 'productivity paradox' of information technology.?

by Daniel J. Power
Editor, DSSResources.COM

According to Wachter (2015) "The history of technology tells us that it is these financial, environmental, and organizational factors, rather than the digital wizardry itself, that determine the success and impact of new IT tools. This phenomenon is known as the “productivity paradox” of information technology. (p. 242)"

Wachter explained the overriding problem in the Preface to The Digital Doctor, "In our sliver of the world, we’re learning, computers make some things better, some things worse, and they change everything. Harvard psychiatrist and leadership guru Ronald Heifetz has described two types of problems: technical and adaptive. Technical problems can be solved with new tools, new practices, and conventional leadership. Baking a cake is a technical problem: follow the recipe and the results are likely to be fine. Heifetz contrasts technical problems with adaptive ones: problems that require people themselves to change. In adaptive problems, he explains, the people are both the problem and the solution. Leadership, he once said, requires mobilizing and engaging people around a problem 'rather than trying to anesthetize them so you can go off and solve it on your own.' The wiring of healthcare has proven to be the Mother of All Adaptive Problems. Yet we’ve mistakenly treated it as a technical problem: simply buy the computer system, went the conventional wisdom, take off the shrinkwrap, and flip the switch. We were so oblivious to the need for adaptive change that when we were faced with failed installations, mangled work flows, and computer-generated mistakes, we usually misdiagnosed the problem; sometimes we even blamed the victims, both clinicians and patients. (preface xiii).

Wachter explains in Ch. 26 titled The Productivity Paradox, that "The key to unlocking information technology’s productivity gains, it says, is not in the technology itself, but in the emergence of 'complementary innovations.'” p. 245. "Today as ever, changing the way that work is done often determines whether an organization will get its money’s worth from its IT investment."

"In a 2012 New England Journal of Medicine article, Spencer Jones and colleagues from RAND considered the IT productivity paradox in healthcare, settling on three possible explanations for it: measurement, mismanagement, and poor usability. We’ve already discussed the issues of usability in considerable detail, so let’s focus on measurement and mismanagement." Wachter (p. 248)

"In 1988, management guru Peter Drucker, he of “culture-eats-strategy-forlunch” fame, presciently described how the then-fledgling field of information technology would allow organizations to flatten hierarchies and elevate the roles of “knowledge-workers.” In the future, Drucker wrote, “the typical business will be knowledge-based, an organization composed largely of specialists who direct and discipline their own performance through organized feedback from colleagues, customers, and headquarters.” It was the availability of information—“data endowed with relevance and purpose”—that would catalyze this shift. Wachter (p. 249)

"“Organizational factors that unlock the value of IT are costly and time consuming,” Brynjolfsson and a colleague wrote in 1998. “For every dollar of IT there are several dollars of organizational investment that, when combined, generate the large rise in measured firm productivity and value.” This means that an organization’s capacity to avoid treating its IT implementation as a “one and done,” and to keep investing and evolving, is what ultimately determines the outcome." Wachter (p. 250)

The productivity paradox (also the Solow computer paradox) is the peculiar observation made in business process analysis that, as more investment is made in information technology, worker productivity may go down instead of up.


Brynjolfsson, E. and L. M. Hitt, “Beyond the Productivity Paradox: Computers Are the Catalyst for Bigger Changes,” Communications of the ACM 41:49–55 (1998).

Carr, N. The Glass Cage: Automation and Us (New York: W. W. Norton, 2014).

Thompson, C., Smarter than You Think: How Technology Is Changing Our Minds for the Better (New York: Penguin Press, 2013).

Wachter, Robert M. The Digital Doctor: Hope, Hype, and Harm at the Dawn of Medicine's Computer Age, New York, NY: McGraw-Hill Education, 2015, 352 pages, ISBN-13: 978-0071849463

Last update: 2018-08-29 03:05
Author: Daniel Power

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